Dollar General sees same store sales dip in Q2
In the face of declining same store sales in the second quarter, which included declines in each of the home, seasonal and apparel categories, Dollar General said it is revising its outlook for fiscal year 2023, provided on June 1, 2023.
Commenting on the company's Q2 fiscal results, Jeff Owen, CEO of Dollar General said, “While we are not satisfied with our overall financial results, we made significant progress in the second quarter improving execution in our supply chain and our stores, as well as reducing our inventory growth rate and further strengthening our price position."
Owen continued, “These actions were an important driver of improving customer traffic trends and growing total market share in the second quarter. In addition, we executed nearly 850 real estate projects during the quarter, further extending our reach and expanding our ability to serve both new and existing customers.”
Owen added, “We are pleased with the advancements we have made, and we are now taking further actions and making additional investments to accelerate our progress and ultimately serve our customers even better. While these investments will pressure our 2023 results, we believe they will further strengthen our foundation as we move into 2024 and focus on driving sustainable growth and creating long-term shareholder value.”
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Dollar General's net sales increased 3.9% to $9.8 billion in the second quarter of 2023 compared to $9.4 billion in the second quarter of 2022. The net sales increase was primarily driven by positive sales contributions from new stores. The increase was partially offset by the slight decline in same-store sales and the impact of store closures, Dollar General said.
Dollar General's same-store sales decreased .1% compared to the first quarter of 2022, driven by a decline in customer traffic. The decrease was partially offset by an increase in average transaction amount, the company said. Same-store sales in the second quarter of 2023 included declines in each of the home, seasonal and apparel categories. The declines were partially offset by growth in the consumables category, Dollar General said.
Dollar General’s gross profit as a percentage of net sales was 31.1% in the quarter compared to 32.3% in the prior year period, a decrease of 126 basis points. This gross profit rate decrease was primarily attributable to lower inventory markups and increased shrink, markdowns and inventory damages, as well as a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories. These factors were partially offset by a lower LIFO provision and decreased transportation costs, Dollar General said.
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Dollar General’s operating profit for the second quarter of 2023 decreased 24.2% to $692.3 million compared to $913.4 million in the prior year period.
The company reported net income of $468.8 million for the second quarter of 2023, a decrease of 30.9% compared to $678.0 million in the second quarter of 2022. Diluted EPS decreased 28.5% to $2.13 for the second quarter of 2023 compared to diluted EPS of $2.98 in the second quarter of 2022.
Dollar General said it is taking certain actions to accelerate the pace of its inventory reduction efforts and making additional investments in targeted areas, such as retail labor, to further elevate the in-store experience and better serve its customers. Overall, the company expects an incremental operating profit headwind of up to $170 million in the second half of 2023 from these strategic actions and investments.
To reflect these strategic actions and investments, as well as softer sales trends and an increase in expected inventory shrink for the second half of 2023, Dollar General is revising its outlook for fiscal year 2023, provided on June 1, 2023.
The company now expects net sales growth in the range of 1.3% to 3.3%, compared to its previous expectation of 3.5% to 5.0%; both of which include an anticipated negative impact of approximately two percentage points due to lapping the fiscal 2022 53rd week.
Dollar General expects same-store sales growth in the range of a decline of approximately 1% to growth of 1%, compared to its previous expectation of growth in the range of 1% to 2%.
The company expects diluted EPS in the range of approximately $7.10 to $8.30, or a decline of 34% to 22%, compared to its previous year-over-year change expectation of an approximate 8% decline to flat growth.